On-time payments on commercial and multi-unit mortgages increased to 95.7%



According to the Mortgage Bankers Association, residential and retail mortgage performance improved significantly in July, and although late payments on office loans are higher than in the past, the lease structure should allay any concerns in the sector.

The share of current commercial and multi-family mortgages rose to its highest level since the start of the pandemic, to 95.5% in July from 95.2% in both countries. May and Juneas per CREF credit assessment report. The monthly change of 0.3 percentage points is the largest since February.

A year ago, 93.8% of all commercial and multi-family loans were current.

According to Jamie Woodwell, MBA vice president of commercial real estate research, the big picture of the loan portfolio needs to be put in context.

Residential and Retail ”are actually the types of property that stand out for having experienced the earliest and most severe stress from the pandemic, and we still see this mostly in the form of late-stage delays as property owners work with service providers. and lenders to sort of figure out what’s next, ”Woodwell said. “Thus, compared to these two, almost all other types of real estate have experienced a much more muted impact from the pandemic.”

The percentage of office owners with delayed payments remains low, but increased significantly from 0.9 percentage points to 3.5% between May and June. In July, it fell again to 3.2%, but it is still the second-highest share in the year that the MBA is tracking this data.

Early-stage delinquencies in this segment have risen over the past few months, but Woodwell cautioned against going into details as the reasons for the rise could be as practical as a temporary delay in a landlord’s payment.

The office sector has longer-term rental structures, which means that the impact of an economic downturn, such as caused by a pandemic, is both delayed and minor.

“Unlike the retail and housing sectors, where you’ve seen the immediate impact of the pandemic on real estate and credit performance, it takes longer for office space to manifest some of these stresses due to longer lease terms,” he said. “And then that stress is damped because you have leases that are going to be renewed for a much longer period.”

The pandemic has speeded up the discussion about the future of the office and much remains to be determined about how companies will use their space and how it will be influence demandWoodwell continued.

However, any “changes are spread over time, which in some way has a calming effect on the performance of the property and the relatively long-term loans based on them,” he explained.

Home loan delinquency was 16.5%, up from 17.6% in June and 26.2% in July 2020, while the percentage of overdue retail loans fell to 9% from 10% a month earlier and 13.9% a year ago.

As for other types of property, industrial loan delinquencies amounted to 1.8% in July versus 3.1% in August, while the share of overdue payments in apartment buildings was 1.5% versus 2.1%.


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